The housing market in Virginia has been volatile during the last few years, with rental prices spiking by double digits in 2020 due to widespread pandemic-triggered moves. In 2022, construction levels reached record highs. However, as supply has increased and demand has cooled, rents have started coming down to more reasonable levels. Still, as we come to the conclusion of 2023, many wonder what’s going to happen to the rental market here in Northern Virginia in 2024. If you have questions, you’ve come to the right place.
Understanding the trends and data behind rent prices is crucial for renters, landlords, and investors alike. If you’re a renter, this information can help you find affordable housing that fits your budget. If you’re a landlord, you’ll find the data you need to set competitive and fair rent prices that attract tenants while also maximizing profits. Finally, it’s important for investors to stay on top of shifts and changes in the rental market in order to identify opportunities for growth. This guide will help you make an informed decision.
Key Factors Influencing The Northern Virginia Rental Market
The three biggest factors influencing the Northern Virginia rental market are economic trends, real estate market trends, and demographic shifts. Let’s break each of these down.
When job growth is strong, and unemployment is low, demand for rental properties tends to increase as the new employees seek housing near their place of work. This demand tends to drive rent prices higher. On the other hand, lower employment levels tend to lead to a comparable decrease in rent prices. The economy of Northern Virginia tends to be looking up, with the unemployment rate in Northern Virginia remaining at pre-pandemic levels. In the last several years, the median household income in Northern Virginia has remained at levels much higher than the national average, making Northern Virginia one of the most affluent communities in the country.
Overall trends expect this average income to continue to increase into 2024. In Fairfax County, the Fairfax Times ran a story titled, “Employment levels show county and state have bounced back economically.” This was published in August of this year and highlights how 200,000 people were added to Virginia’s workforce since January of 2022. Wages have also increased in Fairfax County, further demonstrating the strength of Northern Virginia’s economy.
Aside from employment and median income, the other big factor impacting rental prices is inflation, a national economic trend measured using a number of different statistics. Overall, surveys of economists show a positive outlook on inflation, with The Survey of Professional Forecasters predicting 2024 inflation to be around 2.5% (CPI). This is over 1% lower than the change in CPI which occurred last year of 3.7%. Inflation can impact the cost of building materials as well as the cost of living. Generally, higher inflation means higher rents, and lower inflation would mean lower rents.
So, what’s the conclusion?
The strong and thriving economy in Northern Virginia increases the likelihood that rents will increase in 2024, however, this increase could be undercut or reduced by the reduction in inflation and we therefore predict that rents in Northern Virginia will have a 0% increase for 2024 and remain that way into 2025. In some cases we expect rent prices to fall. For example, Landlords who are overpriced or priced too aggressively over the past several years will need to cut rent prices drastically. Of course, we cannot make a full prediction without considering the impacts of the other factors. Let’s look at Real Estate Market trends.
Real Estate Market Trends
One of the biggest single factors impacting rent in the real estate market is housing inventory and demand. Construction levels were extremely high (breaking records) in 2022 as developers responded to the dramatic increase in demand brought about by the pandemic. 31,000 apartment units started development in 2022, and by Q3, 3,000 had been built and completed. This massive increase in supply has brought about a cooling in demand in recent months, bringing the size of rent increases lower. In Q3 2023, rent still went up, but the increase was the smallest it’s been since Q3 2020. Now, construction activity has also declined, leading to a slowdown in rent growth. Real estate experts believe this to be a sign that the multifamily market is beginning to stabilize in Northern Virginia.
When housing prices go up, rent tends to follow suit. This is largely because people tend to opt to rent at a higher rate because it’s more affordable than buying outright. This drives an increase in demand that then triggers a rise in rent. To take one county as an example, housing prices in Loudoun County are up 7.4% compared to this month last year. Although this increase is modest, it does follow the trends of the last few years in this county, making it likely that housing prices will continue to increase in 2024.
Demographic shifts can have a significant impact on rental prices, as changing population trends can alter the supply and demand dynamics in a given area. One key demographic trend that has been affecting the rental market in recent years is the rise of the millennial generation, who are now the largest cohort of renters in the United States. Millennials tend to have different housing preferences than previous generations, prioritizing walkability, access to public transit, and proximity to urban amenities. As a result, rental prices in urban areas with a high concentration of millennials have tended to rise in recent years, while prices in suburban and rural areas have been more stagnant.
Another important demographic trend that has been impacting the rental market is the growing popularity of remote work and telecommuting, which has accelerated in the wake of the COVID-19 pandemic. As more people have the option to work from home, they are no longer bound to live in the same geographic location as their employer. This has led to an increase in demand for housing in more affordable areas outside of major urban centers, as well as a rise in demand for larger rental properties that can accommodate home offices. At the same time, the shift towards remote work has also led to a decrease in demand for rental properties in expensive urban areas, as some renters are opting to move to more affordable areas where they can get more space for their money.
The COVID-19 pandemic impacted demographics in Northern Virginia significantly, with 2020 being the only year where the population declined since the Census Bureau began keeping records in 1970. Since mid-2022, population growth has come closer to pre-pandemic levels, however, the most populous counties in Northern Virginia (Arlington, Fairfax, and Loudoun) are still growing at fairly low rates. This mirrors the population change across Virginia, which grew by only 2,804. For reference, the population increased by 19,188 between 2018 and 2019. This slow in population growth could be a sign of lower rents in the Northern Virginia area as lower population growth means less demand.
Rent Price Trends In Northern Virginia
The history of rent price trends in Northern Virginia is a complex one that has been influenced by a variety of factors over the past few decades. One of the most notable changes in the rental market over the last 20 to 30 years has been the steady increase in rent prices, driven in part by the region’s strong economy and growing population. In the early 2000s, for example, rent prices in Northern Virginia were relatively stable, with only modest increases year over year. However, as the region continued to grow and attract new residents, demand for rental properties began to rise, leading to a significant uptick in prices.
Another notable trend over the last few decades has been the increasing popularity of Northern Virginia suburbs as a desirable place to live, work, and raise a family. As more people have moved to the region, demand for rental properties has surged, driving up prices and making it harder for many renters to find affordable housing. This trend has been particularly pronounced in recent years, as the pandemic has prompted many people to relocate to Northern Virginia in search of more space and a better quality of life.
There have also been some positive developments in the Northern Virginia rental market over the years. For example, the region’s strong economy and growing population have led to significant investments in new construction, creating more rental housing options for residents. Additionally, advances in technology and data analysis have made it easier for renters, landlords, and investors to understand market trends and make informed decisions about pricing and investment.
In 2018 and 2019, rent increases were fairly modest, reaching only around 3% each year. In Q3 of 2022, rent was reduced for the first time in several years, and the overall change was 0.6%. This was immediately followed by a huge spike in rent prices, with overall rent going up 10.2% in Northern Virginia and 17% nationally in 2021. However, since then, rent price increases have started to stabilize. This year, rents went up only 2.7%, putting the annual rent change at pre-pandemic levels for the first time since 2020.
What Will Rent Prices Do In 2024?
A major factor impacting rent prices and the entire real estate market is mortgage rates. Currently, the national average mortgage rate for a 30-year fixed-rate home loan is above 8%. A high-interest rate economy increases the cost of living and tends to slow the economy down. Construction of new apartments also stalls when interest rates are as high as they’ve been, reducing supply and driving rent prices higher. It’s highly difficult to predict volatile mortgage rates. However, there are current major factors that contribute to the directional movement of these rates. Currently, the extremely high mortgage rates have been chiefly driven by the Federal Reserve’s repeated interest rate hikes in the last few months. These increases have been driven by the Federal Reserve’s goal of reducing inflation. The data shows inflation to be receding slightly, and some reports suggest the Federal Reserve may be making some small rate reductions in 2024. These are unlikely to meaningfully impact rent prices immediately but may have an effect on the overall economy over time.
After a fairly sharp decline this year, realtors in Virginia are predicting home sales to increase in 2024. This comes with a predicted increase in home prices by 1.2%. The increase in sales reflects an expected increase in demand for housing, as does the increase in sales prices. Both of these factors lead us to believe that it is probable that rents will continue to increase in the coming year. However, this increase may be the smallest of the last few years. As we have already mentioned, the growth of rent prices has been steadily slowing over the past few years, and that trend is likely to continue.
Virginia realtors note that different regions of Virginia have been impacted at different levels by these economic factors. Southern Virginia markets have experienced faster home price increases (and thereby rent increases) than the communities of Northern Virginia. However, home prices still rose throughout the state by an average of 7% and are likely to increase next year.
In the next section, we’re going to look at some of the largest Northern Virginian communities and the factors that could influence their rent prices as we head into 2024.
Suburbs In Focus – Impact on Rent Prices
Arlington, Virginia, is located just across the Potomac River from Washington, D.C., with over 200,000 residents. The average rent for an apartment in Arlington is $2,226 monthly. This Northern Virginia suburb is an exclusive community with the cost of living being 41% higher than the national average. The high population density and proximity to Washington, DC, make it likely that Arlington will continue to experience high levels of demand for rental housing. The presence of government agencies, technology companies, and consulting firms tends to give Arlington a strong job market, attracting many new residents year after year and new employees looking to rent as they get started in life. On the other hand, these factors could be counteracted by recent changes in Arlington County’s housing policies. The county reached an agreement in March of this year to permit landowners to construct multi-family homes (duplexes to six-plexes) on land previously zoned for single-family homes. This new rule will likely increase the supply of housing and thereby bring down home sale prices and rent rates. However, it will take time for this policy to have an effect.
Alexandria is another of the largest suburbs in Northern Virginia. It shares many of the same characteristics as Arlington in terms of close proximity to Washington, D.C., as well as easy access to important employers. The average rent in Alexandria for an apartment is $2,069. Arlington, Virginia, is home to 155,000 residents and is just 15 square miles. It is the densest city in Virginia. The high population density in Alexandria makes it likely that changes in housing costs and rent prices will heavily impact this community. The city estimates that around 15,000 low to mid-income Alexandria renters spend over 30% of their income on housing. The local government has been actively working to address housing challenges. However, residents are in disagreement over the best way to solve the housing problem. Even the small expected rent increase next year could have a major impact on this community in 2024.
Fairfax is the third suburb in Northern Virginia that we wanted to look at regarding rent prices. The population of Fairfax County is around 1.1 million as of 2020 data. The average rent for an apartment in Fairfax falls within similar levels that we have seen with the other areas in this region. The average rent is currently $2,302. Fairfax is likely to be impacted by all the economic factors we have discussed previously. One of the unique factors that could work in favor of lower rent in Fairfax is the large number of new housing being constructed. New housing increases the supply and reduces the cost of housing, thereby bringing the cost of rent down. Here are a few of the top new projects added this year to the county:
How Renters Can Deal With Volatility In the Market
Dealing with a volatile rental market can be challenging as a renter, but there are practical steps you can take to save money and minimize the impact of market fluctuations on your budget.
Here are some tips to help you navigate a volatile rental market:
- Negotiate your rent: When the rental market is volatile, landlords may be more willing to negotiate on rent prices. It’s worth asking if there’s any wiggle room in the rent amount, especially if you’re a long-term tenant. You can also offer to sign a longer lease in exchange for a lower rent.
- Look for move-in specials: To attract tenants, landlords may offer move-in specials such as a free month’s rent or a waived security deposit. Keep an eye out for these deals, but make sure to read the fine print to ensure there are no hidden costs.
- Consider a roommate: Sharing a rental space with a roommate can help cut your housing expenses in half. Make sure to choose a trustworthy roommate and set clear expectations about shared expenses and responsibilities.
- Be flexible with your location: If rental prices are too high in your desired location, consider expanding your search to nearby areas. Look for neighborhoods that are up-and-coming or have a lower cost of living.
- Avoid peak rental periods: Peak rental periods, such as the summer months when college students are looking for housing, may drive up rental prices. Consider moving during the off-season when there’s less competition for rental properties.
- Look for energy-efficient rentals: Energy-efficient rental properties can save you money on utilities in the long run. Look for rentals with Energy Star appliances, efficient heating and cooling systems, and good insulation.
- Take advantage of renter’s insurance: Renter’s insurance can protect your belongings in case of theft, fire, or other disasters. It’s usually affordable and can give you peace of mind.
Dealing with a volatile rental market requires some flexibility and creativity. By negotiating rent, looking for move-in specials, considering a roommate, being flexible with location, avoiding peak rental periods, looking for energy-efficient rentals, and taking advantage of renter’s insurance, you can save money and make the most of your rental experience.
Government and Policy Interventions
In the August 2023 elections in Northern Virginia, housing policy was one of the most hotly debated topics. Commonly seen on signs at this year’s races was a reference to “exclusionary zoning.” Exclusionary zoning is a term that refers to the practice of using zoning laws and regulations to limit the number or types of housing units that can be built in a particular area. Opponents of zoning rules like this argue that these laws unfairly disadvantage low-income families or minority groups. On the other side, residents argue that exclusionary zoning is critical to minimize overcrowding and maintain property values. The end result is that several counties in Northern Virginia have taken legal action to address the housing and zoning issues. The policies that are decided in these meetings are likely to have a direct impact on rent prices, making them pertinent to our discussion.
A key figure in these policy discussions is the YIMBY movement. YIMBY is a growing movement impacting the housing community in Northern Virginia and refers to “Yes In My Backyard.” The YIMBY movement believes that zoning codes should be changed to allow for more types of housing and more density in regions where homes are harder to find and afford. The model for their vision is the community of Del Ray, a neighborhood in Alexandria where a variety of housing styles have been allowed to be built in the same location. This movement is likely to continue to have a major impact on housing policy and thus rent prices in 2024.
The Changing Rent Price Landscape of Northern Virginia
No one knows the future. So we cannot speak with certainty about what rent prices will do in 2024. However, in this article, we have provided you with detailed information and data showing the past trends of rent in the region and where it is likely to go in the future. Although the current indicators suggest that rent will likely increase in 2024, it is also likely to be the smallest increase of the last several years. Important regions like Alexandria and Arlington are likely to be most impacted by these changes in rent pricing. Rent pricing in these regions will also be impacted by local government policies and demographic shifts.
Overall, it’s safe to say that the rental market of Northern Virginia is still returning to normal after the pandemic rocked the economy. However, it is far closer to normal than it has been in the last few years. There are many fundamental elements of Northern Virginia that make it an attractive real estate market that will continue to recover and thrive in the future.